EU demands more from UK on Brexit trade

It’s up to EU leaders to give approval for trade talks to begin and the first chance they have to do that is a mid-October summit

by BLOOMBERG

BRUSSELSPrime Minister Theresa May’s speech failed to break the Brexit stalemate, as the European Union (EU) demands more from the UK if there’s to be any hope of a discussion about trade next month.

As the fourth round of talks kicked off, both sides remain divided over when Britain should agree to the size of its bill. European affairs ministers from the 27 other EU states were briefed on Monday by chief EU negotiator Michel Barnier in Brussels, and the prevalent mood was one of scepticism over whether talks can move from the divorce stage to the future relationship at an October summit.

The shift in tone was appreciated — and perhaps words of encouragement could be forthcoming at the summit but the EU stood ready to dash May’s hopes for a breakthrough, according to two people familiar with the discussions, who asked not to be named because the session wasn’t public.

Her offer last Friday to pay a financial settlement was seen as key to breaking the impasse. Yet as the talks resumed, her Brexit point person, David Davis, continued to insist that the final bill won’t be agreed on until the future relationship is settled.

“It’s obvious that reaching a conclusion on this issue can only be done in the context of, and in accordance with, a new deep and special partnership with the EU,” Davis said, standing next to Barnier, as he called for “pragmatism” on each side and said there were “no excuses standing in the way of progress”.

It’s up to EU leaders to give approval for trade talks to begin and the first chance they have to do that is a midOctober summit. They’ll have to be satisfied that “sufficient progress” has been made on the bill and other divorce issues like the Irish border.

Several ministers, speaking on condition of anonymity after the meeting with Barnier, echoed his view that May’s big speech in Florence was constructive, but said there wasn’t much optimism that it would unlock the door to trade negotiations by next month.

Yesterday, she would have had a working lunch in London with European Council president Donald Tusk and heard the bloc’s assessment first hand. Tusk, who had said he’d like Brexit to be reversed, will get a readout from Barnier first.

This week’s talks “should be a moment of clarity,” Barnier told reporters. “The EU is keen and eager to understand better how the UK government will translate the prime minister’s speech into negotiating positions.”

The bloc’s hesitation stems from a feeling among diplomats and officials steeped in the process that the UK’s intentions are still unclear. The signs from the UK have been confusing at best as May seemed to struggle to tame her own senior ministers — with Foreign Minister Boris Johnson openly defiant — and keep all warring factions on message.

For their part, EU officials are wary of losing the ability to use trade as leverage to extract the maximum amount of money. They also say they have no full understanding of what Britain wants from its transition period, or how long it should last.

Several ministers said there was general agreement among the EU’s 27 other governments that more details are needed on May’s proposals. Back in Lon

don, there are those in May’s government that favour a longer transition such as Chancellor of the Exchequer Philip Hammond and the pro-Brexit wing that want it as short as possible.

May’s speech “was a small step in the right direction,” Denmark’s Foreign Minister Anders Samuelsen said in an interview after Barnier’s briefing. Irish Prime Minister Leo Varadkar, who met May in London on Monday, said a positive decision in October was still possible, but it was too early to say.

As the clock runs down, businesses have more reason to fret about the cliff-edge scenario where the UK crashes out of the bloc with no deal and higher tariffs. Months of diplomacy between London and Brussels have reaped few rewards and in March 2019 the UK leaves.

If leaders officially recognise limited progress in October, it would send a positive signal to the British government, and reflect a more upbeat mood in Brussels since May’s speech.

That would pave the way for leaders to formally give the green light at the next scheduled summit, in December. — Bloomberg